Credit card use among people with less-than-stellar credit is on the rise, according to a recent report by the New York Federal Reserve Board.

While the historic rate of people with good credit scores that use credit cards has held roughly steady at 88% over the years, credit card usage among those with “subprime” scores (those below 620 for purposes of the report) has seen significant growth, the report showed.

Thomas Nitzsche, spokesperson for Clearpoint Credit Counseling Solutions, said part of the reason for the uptick in credit card usage among people with lower credit scores is because credit is cyclical.

“It’s not surprising to see growth as the recession fades into history,” he said. “The growth in non-traditional credit scoring models has also enabled lenders to lend to more borrowers, particularly millennials with thin credit profiles.”

A Credit Card For Every Level of Credit

He also cited the combination of looser lending requirements and consumers’ willingness to take on more debt as other factors affecting growth in credit card use.

According to a Wall Street Journal report on the New York Fed’s report, the number of consumers with a credit card and credit scores below 620 increased to 50% in 2015 from a low of 45.6% two years prior. And for people with credit scores between 620 and 660, the number of those with a credit card rose to 58.8% in 2015 from a low of 54.3% in 2013. These are the highest rates of credit card use among subprime cardholders since 2008, before the Great Recession.

The really good news from the New York Fed is that less than 1% of all credit card balances are 90-180 days delinquent. That’s the lowest delinquency rate on record since 2003. Likewise, severely delinquent balances, including those in collections or written off by creditors, are also low, at just 6.2%.

If you have less-than-great credit and are considering getting a credit card, there are several things you should keep in mind.

1. Know Your Credit Score

First of all, it’s good to know your credit score because, if it’s really low, it could mean you have errors on your credit reports that you can fix and, by doing so, raise your credit score. That will help you qualify for a broader range of credit cards that could have better interest rates and possibly even rewards. You can start this process by checking your free credit scores, updated monthly, at Credit.com.

If your situation is a little more serious and you think you might need help improving your credit, you might want to consider how a credit repair company can help.

2. Know What Cards You Qualify For

Once you know what your credit scores are, you’ll be able to determine what credit cards you might qualify for. This is important because every time you apply for new credit, it’s reflected on your credit reports and your credit scores will take an initial hit. Apply for a lot of new credit at once, and it could be a red flag to some banks. So, do a little research and find out which cards are best for your particular financial situation so you don’t blindly apply to card after card only to be turned down each time. You can start looking for a credit card that’s right for you using our credit card finder tool.

3. Comparison Shop

Once you’ve found several cards that fit your financial situation, start comparing interest rates, fees, terms, etc. It’s a good idea to read the fine print so you understand fully what your financial responsibilities will be. And don’t hesitate to call the company to have them explain something you don’t understand. If you’re approved and you start using the card, you are legally bound to abide by the terms of the agreement.

4. Don’t Go On a Spending Spree

Yes, you now have a credit card. But that doesn’t mean you also have a wad of free cash to go spend however you wish just because you don’t have to pay it all back right away. That 12.9%, 18.9% or even 22.9% interest rate can turn your shopping spree into a major headache when you still haven’t paid it off six months down the road. If you don’t believe it, just check out how much debt can cost you with our lifetime cost of debt calculator.

5. Make Your Payments On Time & Try Not To Carry a Balance

How you use your credit cards can significantly impact your credit scores, for better or for worse. Max out your card and it could hurt your credit. Pay it off every month and you’ll likely see your credit scores improve. Make a late payment? You’ll not only pay a penalty, but it will also be reflected on your credit. Don’t pay your minimum balance for 30 days, and your credit could really take a hit.

Payment History: Accounts for roughly 35% of your score. This one is pretty self-explanatory: Paying your bills on time will help keep your scores high, while late payments, charge-offs, and collections will hurt. If you’re trying to improve your credit rating, avoid the latter at all costs. And while this category makes up the largest single chunk of your scores, it’s important to understand that 65% of your score is determined by other factors. Meaning that there’s more to it than simply making your payments on time. Let’s take a look at the other categories …

Amounts Currently Owed: Thirty percent of your score is based on the amount of debt you’re currently carrying — or more specifically, the amount of money you currently owe your creditors. While this category looks at the total amount that you owe (credit cards, home loans, car loans, etc.), it’s the credit cards — or revolving accounts — that typically have the most impact on your credit score. In order to maximize your scores in this section, you should keep your balances in relation to your credit limits as low as possible.

Length of Credit History: Consisting of roughly 15% of your score, this category specifically measures how long you’ve had credit. It does so by reviewing all of your accounts and looking at when they were opened. Obviously, the longer you’ve had credit, the more points you’ll earn in this section. This is just one of the reasons why it’s not a good idea to close old, but good accounts. Why would you want to lose the good credit history?

Types of Credit: Worth 10% of the points in your credit score, this section is looking for a healthy mix of accounts. Diversity is key — having a mix of different types of accounts, including credit cards, auto loans, mortgage loans, etc., will insure you do well here.

Searches for New Credit: This section accounts for 10% of your score. Basically, when you apply for credit, an inquiry will post to your credit report showing that you’re seeking credit. Having too many inquiries in a short period of time can hurt you. As a general rule of thumb, try to avoid excessively shopping for credit, and only open a new credit account when you really need it. (Note: By law, inquiries remain in your credit reports for two years. However, only inquiries in the last 12 months are factored in your credit score calculation.)

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Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Constance is an editor and writer at Credit.com. Prior to joining us, she worked as an editor for MSN.com, senior digital producer for CNBC, and digital producer for NBC Nightly News.
She also is a graduate of the International Culinary Center in New York, has worked for chefs such as April Bloomfield and Jean Georges Vongerichten, and is the founder of Crave Personal Chef Services in Austin, Texas. More by Constance Brinkley-Badgett

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